Elves' Legacy: Mastering Estate Planning
Wills, Trust, Tax & Probate team |06 December 2023
After securing their dream home and setting up a cohabitation agreement, Buddy and Holly, the ever-forward-thinking elves, turned their attention to the future. They wanted to ensure that their hard-earned assets, now including their cherished home, were passed down efficiently when the time came.
This led them to the doors of Nash & Co, where they delved into the intricacies of Inheritance tax and Capital Gains tax.
Their journey began with discussing Capital Gains tax, particularly regarding gifts, Buddy and Holly were guided through scenarios such as gifting an investment property. The increase in the property’s value could means that there is a significant Capital Gains tax liability. The team suggested strategies like sharing the ownership before gifting and effectively using their annual allowances to lessen the tax burden.
Additionally, the concept of deathbed gifting was discussed. Though a sensitive subject, it was an important strategy for tax planning, particularly in transferring assets between spouses to optimise their Capital Gains tax impact.
The topic of appreciating assets, like land with potential future value, was another key area. The team advised that gifting such assets sooner rather than later could be more tax-efficient, as Inheritance Tax would be based on the asset's value at the time of the gift and not it’s future value.
The intricacies of gifting company shares were also explored. Buddy, with a keen interest in entrepreneurial ventures, learned how to maintain the benefits of Business Property Relief even after transferring shares. It was a balance of maintaining tax relief while shifting ownership.
The team explained 'Locking In' of Gifts to Trusts to Buddy and Holly. Buddy considered placing assets into a trust for Holly, but the Nash team explained how a seemingly straightforward decision could extend the IHT liability period to 14 years, rather than the standard 7. This outlined the importance of timing in financial planning.
Through these discussions, Buddy and Holly realised that effective estate planning was a delicate balance of immediate decisions and long-term strategies. It was about weaving through the complexities of tax allowances, strategic gifting, and timing.
Nash & Co emphasised the importance of a well-considered approach. While sometimes immediate gifting was beneficial, in other situations, a staggered approach could yield a larger tax saving. The key was in understanding the nuances of Inheritance tax and Capital Gains tax and planning accordingly.
Buddy and Holly left Nash & Co with a newfound understanding and a comprehensive plan. Their story is a reminder that with careful consideration and expert guidance, you can ensure that your legacy is safeguarded and efficiently passed on to future generations.
To talk about this with the team in more detail, click here.
